Japan was commended as the leading contributor to the International Monetary Fund's (IMF) Poverty Reduction and Growth Trust (PRGT) at the annual meetings of the IMF and World Bank. The PRGT, which provides low or zero-interest loans to low-income countries, has seen Japan account for 20% of its funds. Amidst the COVID-19 pandemic, over 50 low-income countries have availed of $29 billion in interest-free loans through the PRGT. The IMF predicts that demand for PRGT lending could surge to almost $40 billion next year, quadrupling the historical average.
Every dollar from subsidy resources enables the PRGT to offer about $5 in zero-interest loans. The IMF is tackling a $1.2 billion shortfall in a $3 billion subsidy account approved in 2021, with contributions from 40 nations including emerging economies. Kristalina Georgieva, IMF's managing director, expects an influx of pledges at an upcoming steering committee meeting. Details of fundraising efforts scheduled for Saturday are set to be announced soon.
In other news from the annual meetings, Spain's pledge to reduce its deficit to 3% by 2024 was under scrutiny. The commitment is based on economic growth, labor market dynamism, and the removal of anti-inflation measures. Despite this, the IMF projects a deficit increase t 3.4% from 2025 and has urged further actions.
The IMF has revised this year's deficit forecast for Spain to 3.9% after lowering public expenditure estimates. However, it also reduced Spain's growth forecast to 2.5% this year and 1.7% in 2024. Vice-President Nadia Calviño highlighted Spain's robust economic growth and stated that fiscal consolidation would commence with the gradual elimination of anti-inflation measures and addressing pressures on the pension system in the 2024 budget plan.
The IMF suggested that temporary extraordinary taxes on energy companies, banking, and large fortunes could contribute significantly but highlighted the need for a tax reform. The IMF also improved the debt outlook for Spain, predicting a decline from 107.3% of GDP in 2023 to 103.9% in 2025.
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